Sorting out the rules for divorced, spousal and widow's benefits

(Boston University economist Larry Kotlikoff has been answering questions about claiming Social Security benefits for PBS for over three years. The book he co-authored, Get What’s Yours: The Secrets to Maxing Out Your Social Security, was a New York Times bestseller. He is also the developer of Maximizemysocialsecurity.com, a Social Security benefit maximization tool. Please click on this link to pose your Social Security questions to Larry and see his previous Q&As.)

Before I get to this week’s post on claiming Social Security when you’re in a second marriage, a brief update on last week’s piece:

I told you how angry I was about the Social Security Administration’s new, unfortunate policy requiring people to have smartphones and text if they wanted to get into their MySocialSecurity online account, as a security measure. (That account is the one that lets you check on your Social Security earnings record and get an estimate of your future benefits.) I’m pleased to say — and would like to take a little credit — that Social Security has reversed course and has dropped that requirement. But, Social Security’s site says, the agency encourages people with text-capable smartphones “to take advantage of this optional extra security.”

Social Security has no cohabitation policy or police. Their staff has no idea who is coupling with whom and, it seems,​ could care less.

Ask Larry: Social Security and Second Marriages

Now to this week’s Ask Larry question (somewhat shortened) and answer:

Dear Larry,
I started taking Social Security benefits at 62, turned 66 in March and am married. My husband is 65. I was married previously for around 18 years. My ex-husband is 71, retired at 66 and is on Social Security, earning the highest amount they pay, I believe around $2,600 per month. My current husband has back and knee problems and it would help immensely if I could collect on my ex’s Social Security benefits. Then maybe we could afford for my current husband to quit his job when he turns 66.

The Social Security site says if a divorced spouse was married 10 years or more, she can collect on her ex-husband’s Social Security benefits. It also says she must be single. There was something in there about a person collecting half of what their ex gets in benefits at Full Retirement Age.

Since I started collecting at 62, does that mean I couldn’t get half? And would I have to divorce my current husband, who I deeply love, in order to get benefits on my ex-husband’s earnings? If I got divorced to get my ex’s benefits, how long would I have to be divorced before I could remarry my current husband and still get them? I really don’t want to do that and I wish there was some away around that. It is all so confusing.

Sincerely,

Helen

Dear Helen,

Yes, you can divorce your current husband and collect excess divorced spousal benefits. But they could be zero if you earned too much relative to what your ex earned.

The reason you could collect an excess spousal benefit is because a) you were married for 10 or more years and b) you meet at least one of these two requirements: a) you have been divorced for two or more years and your ex is over 62 or b) your ex is collecting his retirement benefit.

Unfortunately, once you take your own retirement benefit, you can no longer take a spousal or divorced spousal benefit on its own, in which case you’d collect a full spousal or full divorced spousal benefit, equal to half of your husband’s or ex-husband’s full retirement benefit. Since you are already taking your retirement benefit, Social Security just gives you your excess spousal benefit in addition to the retirement benefit you are receiving. The excess divorced spousal benefit equals 50 percent of your ex-spouse’s full retirement benefit less 100 percent of your own retirement benefit. Stated differently, it’s your full divorced spousal benefit less your own full retirement benefit.

As soon as your divorce is finalized, you could file for your excess divorced spousal benefit and collect it together with your own reduced retirement benefit. You could continue to live “in sin” with your current husband.. My understanding is that this is all perfectly legal. Social Security has no cohabitation policy or police. Their staff has no idea who is coupling with whom and, it seems, couldn’t care less.

The Excess Divorced Spousal Benefit

The big issue for you is first whether your excess divorced spousal benefit is actually positive and, if so, whether it’s large enough to make up for the costs of getting divorced and adjusting your estate plans so that if you or your husband die, the other inherits what he or she would have inherited had you remained married.

If you do get divorced, your current husband can collect just a full divorced spousal benefit on your work record starting at 66, if he hasn’t started collecting his own retirement benefit. If that’s the case, he’d be able to collect half of your full retirement benefit, even if he keeps working, for the four years between 66 and 70. Then, at 70, he could start collecting his own retirement benefit at its highest possible value.

This would also maximize your excess divorced widow’s benefit were your current husband to die. (i.e., you could flip from collecting an excess divorced spousal benefit from your first ex to collecting an excess divorced widow’s benefit from your second ex —your current husband). Then when your first ex dies, you could collect the presumably higher excess divorced widow’s benefit from you first dead ex.

If You Don’t Get Divorced Again

Now, if you don’t get divorced, your current husband can still collect just a full spousal benefit off your work record between 66 and 70 and then take his own retirement benefit. This would maximize the excess widow’s benefit you would collect from your husband’s work record were he to die before you.

The excess divorced widow’s benefit is higher than the excess divorced spousal benefit. It equals, essentially, the difference between your dead ex’s actual, not full, retirement benefit and your own retirement benefit.

One strategy to consider if your excess spousal benefit from your first husband is zero or small is to wait until you believe your current husband is about to die and then divorce him before he does. This way, you could collect a higher excess divorced widow’s benefit off your first husband once he dies and you can stay married pretty close to the whole way and have a much more comfortable widowhood. While waiting to collect your excess divorced widow’s benefit from your first dead ex, you could collect an excess divorced widow’s benefit from your second dead ex.

Another Option to Consider

Here’s another option: If your excess divorced spousal benefit is positive, but small, you could get divorced now, live in sin with your new ex (your current husband), collect an excess divorced spousal benefit for four years, suspend your own retirement benefit and restart it at a 32 percent higher value at 70.

When you start collecting your age-70 benefit, your excess spousal benefit will be recomputed as half your ex’s full retirement benefit less 100 percent of your age-70 retirement benefit. If your recomputed excess divorced spousal benefit in this scenario is zero, this strategy may pay off because it means you will have gained something from having suspended your retirement benefit for four years.

Now, to be clear, I’ve been purposely writing all this in the extremely cold calculating language of an economist and doing so to point out the absurdity and cruelty of the current design of Social Security when it comes to these issues. I’m not keen on seeing you get divorced because I think it would be a blow to you psychologically. But living on peanuts for decades is also no fun, so …

Sorry for the long answer. Your seemingly simple question is not so simple.